Income statement for Year : 1

Using Absorption Costing Approach

Number
ITEM of units £ P.U. AMOUNT £ AMOUNT £

SALES 3,000 92 276,000

MARGINAL COST OF SALES ,…….. ………. ………..

OPENING STOCK 0 0
ADD: VARIABLE PRODUCTION COST: ………… ……… ………..

Direct Material 3600 17 61200

Direct Labour 3600 11 39600

Variable Expenses 3600 7 25200

Fixed indirect production cost 84000

Total Production Cost A 210000

Less: Closing stock at end of year 1.
[Opening stock units+units produced -
units sold] use formula to calculate
amount. B 35000

Cost of SALES : A-B: 175000

Gross Profit: Sales - Cost of Sales : 101,000

Selling and Distribution Overheads 5700

Admin Overheads 10500 16200

Profit from operations Before Interest &
Tax (PBIT) 84,800

Interest Expenses 1200

Probit Before Tax [PBIT-interest] 83,600

Corporation Tax @ 19% 15884

Net Profit 67,716

Year 1: Closing stock calculation

formula: 35000
figures:
Income statement for Year : 2
Using Absorption Costing Approach
Number
ITEM of units £ P.U. AMOUNT £ AMOUNT £

SALES 4,000 92 368,000

MARGINAL COST OF SALES ,…….. ………. ………..

OPENING STOCK 600 35000

ADD: VARIABLE PRODUCTION COST: ………… ……… ………..

Direct Material 4100 17 69700

Direct Labour 4100 11 45100

Variable Expenses 4100 7 28700

Fixed indirect production cost 84000

Total Production Cost A 262500

Less: Closing stock at end of year 2.
[Opening stock units+units produced -
units sold] use formula to calculate
amount. B 700 38841.46341463

Cost of SALES : A-B: 223658.536585366

Gross Profit: Sales - Cost of Sales : 144,341

Selling and Distribution Overheads 7500

Admin Overheads 10500 18000

Profit from operations Before Interest &
Tax (PBIT) 126,341

Interest Expenses 1450

Probit Before Tax [PBIT-interest] 124,891

Corporation Tax @ 19% 23729.3780487805

Net Profit 101,162

Year 2: Closing stock calculation

formula: 38841.46
figures:

Income statement for Year : 3

Using Absorption Costing Approach
 Number
ITEM of units £ P.U. AMOUNT £ AMOUNT £
SALES 3,500 92 322,000
MARGINAL COST OF SALES ,…….. ………. ………..
OPENING STOCK 700 38841
ADD: VARIABLE PRODUCTION COST: ………… ……… ………..
Direct Material 3400 17 57800
Direct Labour 3400 11 37400
Variable Expenses 3400 7 23800
Fixed indirect production cost 84000
Total Production Cost A 241841
Less: Closing stock at end of year 3.
[Opening stock units+units produced -
units sold] use formula to calculate
amount. B 600 35823.52941176
Cost of SALES : A-B: 206017.470588235
Gross Profit: Sales - Cost of Sales : 115,983
Selling and Distribution Overheads 7100
Admin Overheads 10500 17600
Profit from operations Before Interest &
Tax (PBIT) 98,383
Interest Expenses 1700
Probit Before Tax [PBIT-interest] 96,683
Corporation Tax @ 19% 18369.6805882353
Net Profit 78,313

Year 3: Closing stock calculation 35823.53

formula:
figures: